Facebook Instagram Twitter YouTube

The GameStop Battle on Wall Street Reveals the True Nature of Finance Capital

The GameStop bubble not only reveals what a “casino” the stock market is, but also shows us that when workers employ the methods of the bourgeoisie, they will be shut down and silenced.

M.K. Kumar

January 29, 2021
Facebook Twitter Share
Photo: Paul Taggart / Bloomberg News

The GameStop Bubble has dominated the news cycle this week, as stock prices for what has been a declining retail outlet ballooned from $19.85 on January 12 to $339 on January 27. As of this writing, the stock has dropped to $193, which still is a tenfold increase over its price about a month ago. The astronomical rise in price came from heightened interest in the stock after a number of Internet groups, most notably subgroups on Reddit and Discord, realized the stock was soon to be shorted by the giant hedge funds. Shorting is a common money-making strategy used on Wall Street in which financiers make money by betting on failure. It is part and parcel of the “fictitious capital” game in the market — where capital that has no material basis in commodities or productive activity, and is entirely divorced from labor, typically changes hands among the wealthy. 

To put it simply: major Wall Street traders made a bet that GameStop stock would fall in value and then borrowed against that bet. Amateur investors in different finance-adjacent online groups wanted to prove Wall Street wrong and began to purchase the stock, driving up demand and thereby increasing the price. As the hedge fund traders tried to purchase the stock to close out their bets, GameStop’s stock value only continued to soar. All the hype and continual buying made GameStop the most traded stock on Wall Street this week, outperforming typical market leaders such as Tesla and Amazon. 

The amateur investors who bought GameStop stock — including high school students, restaurant workers, small real estate agents, and others — have seen incredible profits, leading reporters to draw parallels to the profits generally made by institutional investors and hedge funds. While financial institutions and wealthy investors — who have long treated the stock market as their personal casino — have drummed up a storm about the unfairness of individual investors skyrocketing GameStop’s value, bourgeois politicians —even some “progressive”— have lent their voices to validating fictitious profiteering. Senator Elizabeth Warren Tweeted a statement demanding more financial regulation: “It’s long past time that the  SEC and other financial regulators wake up and do their jobs — and with a new administration and Democrats running Congress, I intend to make sure they do.” She cynically complained that the hedge funds were treating the stock market like their own casino, as if that was something new with respect to GameStop. 

Increased financial regulation has never been enough to curtail shareholder greed, something Warren knows but doesn’t acknowledge. What impetus is there for Joe Biden, the candidate backed by Wall Street, or other Democrats to regulate their huge donors?

Once individual investors began to profit from GameStop stock, even if only briefly, the bourgeoisie took action. Almost with simultaneous coordination, the past 24 hours have seen the Discord and Reddit subgroups get shut down. Robinhood, an online brokerage firm that claims as its mission “to democratize finance for all,” made it impossible to buy GameStop, thereby depriving individual investors of the ability to invest in what is touted as a “free market.” In truth, Robinhood’s biggest customer is not its base of individuals, but hedge funds that buy data about Robinhood users to make inferences regarding where they should invest next. On January 28, a class action lawsuit was filed against Robinhood for removing the GameStop stock from its platform. As per the filing, “Robinhood purposefully, willfully and knowingly removed the stock ‘GME’ from its trading platform in the midst of an unprecedented stock rise thereby … manipulating the open-market.” 

You might be interested in: FinCEN Files: The Capitalists Are Stealing Even More Money than Realized

It seems likely that the federal Securities and Exchange Commission, charged with regulating stock markets, is behind these separate actions, as the SEC put out a statement about increased volatility in the markets and needing to assess the situation and review investor activities. 

While the GameStop bubble has been an interesting story to follow, what the individual investors have done offers no real approach to fighting finance capital. Financial entities use speculation to invest all the time — and knowingly create bubbles, all to turn a profit. Inflating stock prices is also common across Wall Street: stock buybacks are one of the main ways corporations artificially inflate prices to keep C-suite salaries high and shareholders content. If anything, the GameStop bubble shows socialists that even when workers use the tools of capitalism’s beloved financial system to their own advantage, they will be shut down and punished. The system exists for the wealthy few; for the rest of us, the current system offers nothing. It’s not even something we should aspire to “reclaim.” 

The Associated Press reported that GameStop has become “a battleground where swarms of smaller investors see themselves making an epic stand against the 1%.” This couldn’t be further from the truth: what happened with GameStop isn’t the sort of rebellion we need against the rich, nor does it represent a step closer to socialism. Yes, small investors made some money at the expense of big traders, but finance capital as a whole remains strong, and banks and hedge funds control the reins of our economy. A centralized financial system, especially one that validates fictitious capital and casino-like methods of profit-making such as shorting will never be pro-worker. 

Engaging in financial warfare or stock market terrorism, no matter how adeptly, is not a revolutionary act. As we saw this week, if it has taught the capitalists any lesson, it’s that they should curtail free speech and shut down exchanges as soon as needed to protect their profit-making schemes. As socialists, we must organize the masses and demand the only thing that can set us free: abolishing this rotten financial system.


Facebook Twitter Share

United States

Scabs Will Not Pass: Defend the UAW Strike With Organized Grassroots Power

The Big Three are escalating their use of scabs. The rank and file are fighting back.

Jason Koslowski

September 27, 2023
NYC Mayor Eric Adams stands at a podium.

The Housing Crisis and Migrant Crisis Are Crises of Capitalism

As thousands of people come to the U.S. seeking shelter, politicians around the country are claiming that housing in the U.S. is already in crisis and that there is no room for them. Both the “migrant crisis” and “housing crisis” are crises created and exacerbated by capitalism.

Mike Pappas

September 20, 2023

To Win, the UAW Strike Must Be Organized from Below

The strike at the Big Three has put the working class at the center of national politics. The autoworkers’ demands are bold and touch on issues of growing exploitation across the country. To win big, the strike must be organized from below.

Tristan Taylor

September 18, 2023

The KOSA Bill Is Another Attack on LGBTQ+ People, People of Color, and Children’s Right To Learn

KOSA is ultimately a surveillance bill whose purpose is to limit the spread of progressive politics that pose a threat to the state.

Olivia Wood

September 14, 2023

MOST RECENT

China’s Rise, ‘Diminished Dependency,’ and Imperialism in Times of World Disorder

In this broad-ranging interview, originally published in LINKS, Trotskyist Fraction member Esteban Mercatante discusses how recent global shifts in processes of capital accumulation have contributed to China’s rise, the new (and old) mechanisms big powers use to plunder the Global South, and its implications for anti-imperialist and working-class struggles today.

Esteban Mercatante

September 22, 2023
President Biden giving a speech on Friday, September 15, about the UAW strike. A UAW sign in the background.

Joe Biden Is Afraid of the UAW Strike. That’s a Good Thing.

A few days ago, Biden called on the bosses of the Big Three automakers to give concessions to the striking UAW workers. It’s because he’s scared of the UAW’s power.

Enid Brain

September 20, 2023
Migrants from Northern Africa sit in lines on the Italian island of Lampedusa.

Crisis in Lampedusa: Down with Fortress Europe, Open the Borders!

The way out of the immigration crisis is through the struggle against imperialism. This is a declaration from the European organizations of the Trotskyist Fraction - Fourth International.

Germany Is Threatening to Deport Palestinian Refugees for Their Activism

#StandWithZaid: Zaid Abdulnasser, the coordinator of the Palestine solidarity network Samidoun Germany, is a Palestinian refugee from Syria. The German are threatening to revoke his residence permit due to his political activism.

Tom Krüger

September 18, 2023